Nestle close to finalising $50M factory deal with Cuba

The new investment in the Mariel special development zone will produce coffee and other food-related products if the deal is successful. The zone is part of Cuba's drive to update the centrally planned economy under President Raul Castro.

A state-of-the-art facility of 400,000 square metres in Switzerland was inaugurated in 2009 with an expected output of 4.8 billion Nespresso coffee capsules per year.

Swiss firm Nestle is close to reaching a deal with Cuba on forming a new joint venture to build a $50 million to $60 million factory to produce coffee, biscuits and cooking products, Vice President Laurent Freixe said on Wednesday in Havana.

Cuba has upped its drive to attract foreign funds in a bid to stimulate the economy in recent years. It has introduced a new investment law, creating the Mariel zone, which offers companies significant tax and customs breaks.

"The idea is to create a new joint venture to produce and distribute these products mainly for the Cuban market but also with the idea of exporting some products," Freixe said in an interview.

Freixe, head of Nestle's Americas division, was visiting the island to negotiate the new investment in the Mariel special development zone, west of Havana. Also on the VP's agenda was renewing an existing joint venture producing ice cream for another 20 years.

Nespresso-ing the Cuban way

Coffee in particular is ideal for export, he said, pointing to the success of a limited edition of Cuban coffee by Nestle's Nespresso last year - the first Cuban coffee sold in the United States in more than 50 years.

Freixe said that Nestle would have a 51 percent share in the company.

Nestle has been one of the largest investors in the country since it opened the door to Western capital in the 1990s after the fall of former benefactor, the Soviet Union.

That is comparable to Nestle's share in its two other Cuban factories, one producing ice cream and the other bottled water and other beverages, he said. Nestle also imports food products for sale in Cuban stores.

Cuba said last November it had approved 19 ventures so far in Mariel, which is centred around a container terminal that the country hopes will become a regional hub.

The development zone is part of Cuba's drive to update the centrally planned economy under President Raul Castro, who took over from his brother, the late Fidel Castro, in 2008.

Nestle's new factory, set to begin operations in the second half of 2019, will cater to growing demand after a surge in tourism and help replace imports with locally made products, Freixe said. It will employ around 300 people.

Cash-strapped Cuba has struggled to pay providers on time recently as revenues decline due to a drop in exports as well as the crisis in Venezuela, a key trading partner. Its economy shrank 0.9 percent last year, according to the government.